In a move guaranteed to increase poverty and crime throughout Ghana and West Africa, Barclays Bank, at the 2005 invitation of former President Kufuor, is setting up off shore banking in Ghana. Other big banks are waiting to join in the tax haven business in Ghana following Barclays lead.
Barclays bank is playing a lead role in the establishment of a tax haven in Ghana, in a move that could see huge mineral wealth in west Africa vanish into it from poverty-stricken countries’ coffers, the Observer can reveal.
The controversial British lender has for the last four years worked closely with the Ghanian government to start an International Financial Services Centre offering low taxes and minimal financial disclosure.
Development charities fear that the establishment of a fully operating tax haven so close to oil- and mineral-rich countries such as Nigeria, Sierra Leone and Equatorial Guinea will encourage a rapid increase in tax and capital flight.
There is also concern that cocaine barons, increasingly using west Africa as a trafficking route into Europe, could launder drug money through Ghana.
“Oil-producing nations are plagued by corruption and drug trafficking and the creation of this international financial services centre will make this worse – not better.”
This move was initiated in 2005 by former President Kufuor. In light of what we now know about the theiving and raids on the treasury by himself and his cronies, it looks like they were planning ahead to hide stolen assets from the people of Ghana. We know Kufuor initiated this move from an article on GhanaWeb in 2005, when the offshore banking plans got underway:
Barclays Bank to assist Ghana establish off-shore banking
2005 Accra, March 30, GNA
Barclays Bank Plc is to assist the Government to establish off-shore banking in Ghana, Mr David Roberts, Executive Director of the Board of Directors of Barclays Plc and Barclays Bank Plc, said on Wednesday.
“We have to make the necessary arrangements to make off-shore banking operational in Ghana,” he said in reaction to an appeal by President John Agyekum Kufuor that the Bank cooperated with the Government to establish offshore banking.
President Kufuor made the appeal when a delegation of the Bank’s Directors attending the first International Executive Committee Meeting outside Europe in Accra, paid a courtesy call on him at the Castle, Osu.
The discovery of oil in Ghana was not announced until June 2007. But by 2005 they knew it was in the works. The Cape Three Points Deep Petroleum Agreement was signed in 2002, and potential oil fields mapped, also in 2002. So it seems likely Kufuor and his NPP cronies were planning for the influx of oil cash, and a place to stash and hide the money conveniently close to home. Even without oil, their misappropriation of government assets is impressive. There are many examples documented on GhanaWeb, such as Massive looting at Ministries, especially since the change in government has brought a bit more transparency. Financial transparency is what every watchdog group says is needed in the African oil and resource business. Financial transparency is what off shore banking is designed to eliminate.
Barclays Bank has been repeatedly implicated in illegal and unethical banking operations. In March the Guardian published a number of internal memos from Barclays, from WikiLeaks:
The documents are copies of alleged internal memos from within Barclays Bank. They were sent by an anonymous whistleblower to Vince Cable, Liberal-Democrat shadow chancellor. The documents reveal a number of elaborate international tax avoidance schemes by the SCM (Structured Capital Markets) division of Barclays.
According to these documents, Barclays has been systematically assisting clients to avoid huge amounts of tax they should be liable for across multiple jurisdictions.
A commentator to the Financial Times stated:
I was lucky enough to read through the first of the Barclays documents…
I will say it was absolutely breathtaking, extraordinary. The depth of deceit, connivance and deliberate, artificial avoidance stunned me. The intricacy and artificiality of the scheme deeply was absolutely evident, as was the fact that the knew exactly what they were doing and why: to get money from one point in London to another without paying tax, via about 10 offshore companies. Simple, deliberate outcome, clearly stated, with the exact names of who was doing this, and no other purpose.
Until now I have been a supporter of the finance industry – I work with people there regularly and respect many of them, and greatly enjoy the Financial Times and other financial papers. However this has shone a light on something for me, and made me certain that these people belong in jail, and companies like Barclays deserve to be bankrupt. They have robbed everyone of us, every single person who pays tax or who will ever pay tax in this country (and other countries!)
If Barclays can get away with this in the UK, with UK laws and enforcement, how much more can they get away with in Ghana, where the current legal and enforcement communities have a much shorter history, and are grossly underpaid.
Barclays have also been implicated in corrupt associations and illegal dealings with Equatorial Guinea, and along with other banks in Angola. From the BBC:
The same lax regulation that created the credit crunch has let some of the world’s biggest banks facilitate the looting of natural resource wealth from poor countries.
I have quoted Nicholas Shaxson in previous posts, but what he says regarding the movement of money is right on the mark:
There are basically three forms of dirty money. One is criminal money: from drug dealing, say, or slave trading or terrorism. The next is corrupt money, like the fromer Nigerian dictator Sani Abacha’s looted oil billions. The third form, commercial money – what our finest companies and richest individuals hide from our tax collectors – is bigger. The point – and this is crucial – is that these three forms of dirty money use exactly the same mechanisms and subterfuges: tax havens, shell banks, shielded trusts, anonymous foundations, dummy corporations, mispricing schemes, and the like, all administered by a “pinstripe infrastructure” of mainstream banks, lawyers, and accountants.
. . .
In this parallel secret universe the world’s biggest and richest individuals and firms, News Corporation, Citigroup, and, yes, ExxonMobil – can quite legally cut themselves loose from pesky full taxation and grow explosively, leaving smaller competitors, who pay their full dues along with the rest of us, choking in their dust. This undermines the very notion of capitalism: the big companies’ advantage has nothing to do with the quality or price of what they produce. If you are worried about the power of big global corporations, don’t always attack them directly, but attack bank secrecy instead. This is the clever way to take on the big fish, using a net that would also snag the Sani Abachas, the Mobutus, the North Koreas, the terrorists, and the drug lords.
(Poisoned Wells: The Dirty Politics of African Oil, by Nicholas Shaxson, p.225&227, ISBN 978-1403971944)
In 2007 Kufuor and Barclays raved on about what a wonderful opportunity offshore banking would be for Ghana:
President Kufuor said … the Government was fully aware of the numerous challenges and difficulties inherent in the operation of the facility and gave the assurance that the necessary safeguards had been put in place to stave off abuses.
Legal and administrative measures, he said, had been enacted to provide the needed checks and balances within the economy in particular and society in general.
“These measures should promote best practices in service delivery. More importantly, they should affirm the good faith and determination of the entire society to make Ghana a safe, secure and peaceful environment for investment.”
President Kufuor, through whose initiative the offshore banking had become a reality, said It must help to transform the financial system for accelerated socio-economic development.
He said last year, 658 billion dollars was transferred from developing countries to the developed countries, noting that if about half of this had been lodged in such a facility in Africa, the pace of development of the Continent would have been tremendously enhanced.
If that money had gone into offshore facilities in or near the developing countries, it would have made no difference. The reason for offshore banking is to evade the checks, balances, and safety measures. In fact, offshore banking will allow and promote the legal and illegal theft of money from Ghana, and is designed to do just that. Corporate money, drug money, stolen money, money from arms deals, money from illegal bunkering and corrupt politicians, all disappear offshore. Barclays and other big banks take money out of the reach of the countries those assets came from, and out of the reach of the governments and the citizens they are supposed to serve. I doubt Kufuor’s lavish praise for offshore banking was due to naivité. He was planning to be one of those advantaged by the bank at the expense of his own country. It is not for nothing he is known as Thiefuor to many of his countrymen.
Aside from those few who become very rich indeed, oil, and other extractive resources can make a country much poorer. The phenomenon is described in this article in Foreign Policy:
Collier’s model shows that producers of oil, timber, and minerals would on average see their gross domestic products rise by 10 percent in the first seven years, only to have them crash two decades later to only 75 percent of where they started. Sudden cash flows in unprepared countries, he says, lead to unsustainable public consumption, rising inflation, soaring inequality, trade protectionism, and a real danger of civil war.
As Shaxson points out:
People often put the problem like this: oil money would be a blessing but politicians steal it, so people don’t see the benefits. But it’s much worse: the oil wealth not only doesn’t reach ordinary people, but it actively makes them poorer.
Barclays and other big banks help make and keep the majority of people poorer. They insure there is no level playing field. Offshore banking is the tool that possessors of criminal money, corrupt money, and commercial money use to hide that money from its source, and to prevent reinvestment in the people and the places the money came from. That is why it is so shameful for Ghana to be setting up offshore banking. It is shameful that a former president initiated and promoted this tool to steal from the Ghanaian people, and it is shameful for the current government if they allow this to proceed as planned. If offshore banking goes forward, slums such as in the picture above will expand exponentially, people will suffer and die because their assets are being stolen from them, and they have nothing to fall back on.